When we face financial emergencies, our first instincts can often lead us to the Bank of Family and Friends. It’s comfortable, familiar and feels like there’s no strings attached. However those warm feelings can give way to tension and arguments. As new research suggests, borrowing from loved ones can drive a permanent wedge between our relationships.
According to a Jason Hardin study just published in the Journal of Economic Psychology, the personal lender-borrower relationship is fraught with mixed signals. The study concluded that:
Borrowers are more likely to think that the lender initiated the loan.
The borrower viewed loans that that turned delinquent as gifts.
Lenders were more likely to think that delinquent borrowers avoided encounters while borrowers were mostly unaware of these sentiments.
With such vague and fuzzy borrowing terms, it’s no wonder that a loan can turn you and your loved ones against each other. But the need for spare cash tends to outweigh the potential for a relationship derailment. The National Bureau of Economic Research found that half of all Americans would have trouble coming up with $2,000 in an emergency.
While handouts from family, friends or acquaintances may seem like less of a gamble than borrowing a payday loan, it’s crucial to understand the consequences you could face when opting for the informal personal loan route. In some cases, you just might find that a payday loan could better serve your bonds between family and friends.
Personal Borrowing That Turns Sour
The National Foundation for Credit Counseling (NFCC) estimates that 17 percent of Americans borrow from family and friends for rainy day expenses. These loved ones lend money with the best intentions, often invoking a casual “pay-back-whenever” vibe that’s actually loaded with expectations.
When loan terms lack a clear repayment plan with defined dates, interest rates and amounts, you end up with a perfect recipe for miscommunication, bringing attention to dynamics that only money could create.
Rich Friend, Poor Friend
A loan can be a fast track to underscoring the bank account imbalance between friends. Because you aren’t financial equals, you may feel like you can’t be your lender’s equal at all. This may compel some to feel like they have to use the cash in a way that the lender dictates. Such a relationship can be a breeding ground for resentment from both ends.
Making Light of a Loan
When you borrow from Mom and Dad or your best friend, you might not take it as seriously as you take your bills or bank statements. You’re not concerned with a seedy collections agent knocking on your door or red ink statements inundated with finance charges.
What personal borrowers may not realize is that this money still carries a sense of pressure for the lender’s bank account. When a loan’s urgency falls off a borrower’s radar, it could irritate generous family and friends to the point where they don’t feel like they can trust you at your word.
If you see a friend or family member you have yet to pay back, the loan becomes that big hulking elephant in the room. Money is a sensitive, five-letter taboo word. Not only is it difficult to ask about how repayments are coming along but you‘ll only increase tensions with the request to ask for the cash back.
The Payday Loan Alternative
If you’ve exhausted loan options from family and friends, or you’d rather avoid the potential conflict of personal borrowing altogether, payday loans can provide an advantage in these situations.
Eliminating Emotion from the Equation
You don’t have to be friends with a payday loan, you just have to respect the repayment terms. While your parents or friends may pass judgments about how you spend when you still owe them, a payday loan is a sheer business transaction.
There are no embarrassing encounters or hurt feelings. The terms are in black and white: you apply for the loan, get approved for a specified amount, and repay the loan with interest using your next paycheck.
When loved ones give you cash under few conditions that hold you responsible, they may enable you to squander it. With a payday loan, repayment becomes a priority rather than an afterthought.
Because a payday loan carries such strict repayment terms and high interest, there’s little room for error. You have to worry about late fees, the possibility of debt collectors for delinquency and credit dings.
While these possibilities may scare you, they may be the swift, kick-in-the-butt incentive you need to get your finances in order. The payday route may give you the chance to zero in on a loan for short-term, emergency expenses to get you back on your feet rather than supplying long-term, daily needs.
Reducing Relationship Inconveniences
Maybe your parents sacrificed their anniversary spa retreat to spot you cash. Perhaps your best friend had to cut back on grocery and clothing expenses for six months to safely cover the cost of your loan. Either way, your loved ones might make sacrifices for your benefit.
When used properly, a payday loan eliminates the financial burden for you’re the personal lender in your life. It can also be a time consuming, emotional process to approach family and friends for the money. If you don’t have the luxury of waiting for money in a pinch, the accessibility and ease of the online payday loan process may allow you to get it faster than it would take your parent’s to go to the bank and dig into their savings account.
Use a loan, tend to the repayments and get on with your life. Sometimes when you separate finances from your relationships, it can be the best way to preserve both.